Posts Tagged ‘Student Finacial AId’

The New America Foundation’s Education Policy Program today released a comprehensive package of policy proposals that would provide an overhaul of federal financial aid. The report,Rebalancing Resources and Incentives in Federal Student Aid, calls for specific changes to grants, loans, tax benefits, college outreach programs and federal regulations to provide more direct aid to the lowest-income students while strengthening accountability for institutions of higher education to ensure that more students are able to earn affordable, high-quality credentials.

Rebalancing Resources and Incentives in Federal Student Aid argues the current federal financial aid system is no longer up to today’s demands. Built in a different era, its haphazard evolution over the decades has made it inefficient and overly complicated. The existing system wastes taxpayer dollars and fails to provide institutions and students with the resources and incentives they need to access high-quality credentials and succeed in higher education and the workforce.

With the need for higher education never greater and college growing increasingly unaffordable, the report argues the time has come to put everything on the table. Students and taxpayers need a streamlined aid system that is more understandable, effective and fair. With this new report, New America’s Education Policy Program offers more than 30 specific policy recommendations that are designed to create such a system. Taken together, these recommendations can all be financed with the existing resources that policymakers have already committed to federal student aid. The proposals include:

* Pell Grants: Permanently eliminating the Pell Grant funding cliff and putting the program on a firm financial footing by making it into an entitlement program. Increasing the maximum Pell Grant and providing Pell bonuses to public and private non-profit colleges that serve a substantial share of low-income students. Requiring schools that enroll a small share of low-income students but charge them high net prices to match a portion of the Pell Grant funds they receive.

* Federal Loans: Significantly simplifying the federal student loan system and reducing the dangers of default by requiring all borrowers to repay their debt based on a percentage of their earnings. Encouraging colleges to hold down their costs by eliminating both the Parent PLUS and Grad PLUS programs that currently allow for unlimited borrowing.

* Accountability, Transparency, and Reform: Holding institutions accountable for providing high-quality, affordable educations by extending broad accountability metrics to all colleges. Creating a federal student unit record system to provide a clearer picture of how students fare as they proceed through the educational system and into the workforce.

“Our policies ask more of students and institutions, and provide more in return,” said Kevin Carey, director of the Education Policy Program. “We have designed a simpler, fairer system that will reorganize and leverage existing federal dollars toward the nation’s college completion goals imperative to our economic success.”

It’s crunch time for families counting on loans and grants to pay for college.

Deadlines to fill out the FAFSA, or Free Application for Federal Student Aid, are around the corner and likely generating anxiety in households across the country.

The FAFSA is used to determine how much an applicant or his or her family should contribute toward education costs. Schools then use that figure – known as the expected family contribution – to determine how much financial aid should be awarded to bridge the cost of attendance.

Students who apply online at www.fafsa.ed.gov[http://www.fafsa.ed.gov] can get an estimate of their expected family contribution immediately. With a mail-in application, it may take two weeks or more.

Remember that it’s worth applying even if you don’t expect to qualify for need-based grants.

Before filing, here are five things you should know about the process:

1. Timing Matters

Deadlines for filing the FAFSA vary depending on the state and school. Some are as early as February or March, but filing promptly could pay off.That’s because many have first-come-first-serve policies for their limited pools of aid, said Jennifer Douglas of the U.S. Department of Education.

Deadlines for state aid can be found at www.fafsa.ed.gov/deadlines.htm[http://www.fafsa.ed.gov/deadlines.htm] .

2. Student Assets Count More

To avoid any unpleasant surprises, it’s important to understand how the FAFSA calculates your expected family contribution. The formula is complicated, but one of the more important rules to remember is that student assets and income are weighted far more heavily than those of a parent.

It’s too late now to strategize for a fatter aid package for the upcoming school year. But in the year ahead, consider using a student’s income and assets on education expenses before dipping into a parent’s funds. That will maximize the aid package offered for the following year.

3. Gifts Can Be Optimized

Financial gifts from friends and relatives are counted as student income in determining aid packages.

If you’re looking to maximize aid, ask friends and relatives to save financial contributions for the student’s senior year. Aid for each year is based on the student’s financial information from the previous year.

Another way to maximize outside help is to transfer the money to a parent’s checking account. This minimizes the impact of the gift on the aid package, because a parent’s assets aren’t weighted as heavily.

The same goes for 529 college savings plans; grandparents can transfer them to either a parent or student’s name.

4. There Are Financial Blind Spots

The FAFSA doesn’t factor in consumer debt so don’t expect any extra aid even if you’re swimming in credit card bills or auto loans. Paying down debt as soon as possible will only benefit you.

Another FAFSA blind spot? Retirement funds and pensions. They’re not counted as assets, so it makes sense to sock away money into them. In a sense, you could say the FAFSA rewards two tenets of smart personal finance – paying off debt and saving for retirement.

5. Whining Doesn’t Help

The expected family contribution can’t be negotiated with the Education Department.

That said, families can appeal to a school’s financial aid office for what’s called a professional judgment, or an adjustment of their aid eligibility. This is only an option if there are extenuating financial circumstance